Cannabis Industry Startup Financing (CanStartup)

Program Requirements

DEED provides CanStartup funding to nonprofit lending partners to make loans that must support a new cannabis microbusiness in the legal cannabis industry in the State of Minnesota. Priority must be given to loans to businesses owned by individuals who are eligible to be Social Equity Applicants and businesses located in communities where long-term residents are eligible to be Social Equity Applicants.

Businesses must apply directly with a nonprofit lender. Once the lender approves the loan, they will forward the loan package to DEED for approval by the Commissioner and disbursement of funds for the project.

For More Information

Contact canstartup.deed@state.mn.us.

Loans to Businesses

Each nonprofit lender has authority to determine the specific interest rate, collateral requirements and other terms for each loan made under the CanStartup program. However, the interest rate may not exceed the Wall Street Journal prime rate. The nonprofit may charge a loan origination fee equal to or less than one percent of the loan value. A lender may deny an application that does not fit within the lender’s program guidelines. The nonprofit corporation may retain all earnings from fees and interest from loans to beginning cannabis microbusiness.

Loans must be made to cannabis microbusinesses that are not likely to undertake the project for which loans are sought without assistance from the program.

The State’s share of a CanStartup loan can range from a minimum of $2,500 to a maximum of either $50,000 or $150,000 per project if state contributions matched at least 1:1 by new private financing.

Apply

Businesses must apply directly with a CanStartup Program lender. Lenders accept applications on a year-round basis, subject to funds availability. The application forms, process, and loan eligibility criteria may differ from lender to lender.

The underwriting process and credit decision is left to each lender’s discretion. If a business’s application is approved by a lender; the lender will forward the application to DEED for commissioner approval.

DEED reviews each project application to ensure that it meets program parameters, but generally does not conduct a second credit review. If approved, CanStartup funds are released to the lender for disbursement to the borrower. Each lender will provide and have the business execute the appropriate loan documents.

FAQs

Who qualifies a company to receive a loan from the program?

• The program requires the company to be a new Minnesota-based cannabis microbusiness. Priority must be given to loans to businesses owned by individuals who are eligible to be Social Equity Applicants and businesses located in communities where long-term residents are eligible to be Social Equity Applicants. Loan must be made to cannabis microbusinesses that are not likely to undertake the project for which loans are sought without assistance from the program.

What are the minimum and maximum loan amounts?

• The minimum state contribution to a loan is $2,500 and the maximum is either $50,000 or $150,000 if state contributions are matched by equal or greater amount of new private investment.

What is the interest rate of loans under the program?

• The nonprofit lender will set the terms of the loan, including the interest rate. The rate for loans under the program may not exceed the Wall Street prime rate.

Does each nonprofit lender have unique criteria for deciding whether to make a loan through the program?

• Yes. Each nonprofit lender will have its own criteria and guidelines for considering and approving a loan that is funded by the program.

What counts as a new cannabis microbusiness?

• Business needs to be located in Minnesota and in existence 3 years or less. Business must be classified and licensed as a cannabis microbusiness.
• A cannabis microbusiness license allows the licensee to grow, produce concentrate, manufacture artificially derived cannabinoids, and producing other cannabis or hemp products. A microbusiness can also purchase plants, seeds, and flower, and sell cannabis and hemp products to other licensed businesses and directly to customers.
• In addition to growing, processing, and dispensing cannabis products, the microbusiness can operate an establishment that permits on-site consumption of edible cannabis products and lower-potency hemp edibles.

What are reporting requirements for a nonprofit corporation that receives a grant?

• An annual report to the commissioner is due by February 15 of each year that includes:
• The number of businesses to which a loan was made;
• A description of businesses supported by the program, at a minimum the legal entity;
• An account of loans made during the calendar year;
• The program's impact on business creation and job creation, particularly in communities where long-term residents are eligible to be Social Equity Applicants;
• The source and amount of money collected and distributed by the program;
• The program's assets and liabilities;
• An explanation of administrative expenses;
• Demographic information, as specified by the commissioner, regarding each borrower and;
• An independent annual audit to be performed in accordance with generally accepted accounting practices and auditing standards.